Rising home prices have prompted regulators to increase loan limits for standard loan programs. Fannie Mae and Freddie Mac raised the limit for their conventional, conforming loans by almost 7% to $453,100. This limit applies to all areas of TX and is in effect now.

FHA also raised its loan limit, but the limit varies by county. FHA sets the limit to 115% of the median home price in an area with a ceiling of $679,650 and a floor of $294,515. The floor applies to areas where 115% of the median home price does not reach that level.

TX home prices haven’t reached levels at which the ceiling would apply; however, four TX metros do have a limit greater than the floor. Austin’s limit rose $23k to $384,100 for a single-family home. The DFW limit rose about the same amount to $386,400, still the highest in the state. San Antonio’s limit rose by the greatest amount, over $32k, to $359,950. Houston, still recovering from the oil industry downturn, didn’t see any change, with the limit remaining $331,200. Remember that these limits apply to all the counties in the metro, not just the cities themselves.

The limit for the VA program mirrors the Fannie/Freddie limit at $453,100. USDA programs shouldn’t be affected because loan size is driven by annual income limits, not median home prices.

Since the financial collapse almost a decade ago, rental property buyers have been stuck with a minimum 20% down payment for conventional financing. Not only had Fannie Mae and Freddie Mac not forgotten about all the high-leverage loans they purchased that went bust, but the mortgage insurance companies also got burned. And for conventional financing, you need mortgage insurance to go higher than 80% leverage.

That has changed. Mortgage insurance companies have an appetite for rentals again. At this time for buyers with 680 or better credit, we’re able to accept a 15% down payment.

Of course, you’ll pay a premium for the mortgage insurance. Your MI rate would be roughly 50% higher than what one would pay when buying a primary residence. On a $200k loan, that equates to a monthly MI payment of about $102 assuming good credit. However, it only takes about 5 years to pay the loan down to 78% of the purchase price, at which point the mortgage insurance gets cancelled.

While Fannie Mae and Freddie Mac left the conforming loan limit for single-family homes at $417k in 2016, HUD raised the FHA loan limit in 4 TX metros. Remember that FHA sets an area’s loan limit based on 115% of the area’s median home price.

Median home prices rose in Texas last year, so loan limits rose in Austin, Houston, Dallas/Ft. Worth, and Midland. Austin’s limit rose slightly to $333,500 for a single-family home. Houston’s limit also rose only a little to $330,050. The DFW limit took the prize for the largest increase, rising $24k to $334,650, now the highest in the state. Midland also had a sizable increase, rising to $285,200. The limit in San Antonio didn’t change, remaining at $316,250.

Remember that these limits apply to the entire metro area including surrounding counties. The FHA loan limit remains at the minimum, $271,050, for the rest of the state.

If you have student loans, qualifying for a mortgage just got easier. Fannie Mae and USDA both have updated loan guidelines to reduce the loan payments that we must count when qualifying you.

For loans in deferment, the new guidelines cut the percentage of the loan balance we must use when calculating your total monthly debt from 2% to 1%. This is a big deal because it reduces the impact of student loan debt by 50%. Further, if the actual payment is less than the 1% calculation, the guidelines state that we can use that lower payment, but only if it fully amortizes the loan.

Unfortunately, if the lower payment is due to an income-based or graduated repayment plan, we have to use the 1% fixed amount. Under these payment plans, the monthly payment may rise, which means the current payment may not provide an accurate estimate of the loan’s impact on your finances.

While USDA already has implemented the new guidelines, the changes won’t apply to conventional loans until 4/1.